The following are the 7 Reasons How Payday Loans Can Make Your CIBIL Score Low in an Year’s Time
1. High Interest Rates
Payday loans typically have very high interest rates, which can make it difficult to pay them off in a timely manner. This can lead to late payments and missed payments, which can negatively impact your CIBIL score.
2. Short Repayment Period
Payday loans usually have a short repayment period, often just a few weeks, which can make it difficult to manage your finances and make timely payments.
3. High Debt-to-Income Ratio
Taking out a payday loan can increase your debt-to-income ratio, which is a key factor in determining your CIBIL score. A high debt-to-income ratio can indicate that you are overextended and may have difficulty making payments.
4. Multiple Inquiries
Applying for multiple payday loans can result in multiple credit inquiries, which can also negatively impact your CIBIL score.
5. No Credit History
If you have no credit history, taking out a payday loan can be detrimental to your CIBIL score as it is one of the way to build your credit.
6. No Positive Payment History
Payday loans do not report to credit bureaus, so you won’t have any positive payment history on your credit report if you pay the loan on time.
7. Defaulting on the Loan
Defaulting on a payday loan can have severe consequences, including wage garnishment, legal action, and damage to your credit score.
Also read more about the Payday Loans by the following URLs